People who need emergency funds quickly and don’t have access to credit cards or bank loans may know they have several other options. Individuals with problem credit may be able to take out a vehicle title loan, a pawn loan, a payday loan, or an installment loan from a company like Blue Trust Loans. Each option has advantages and drawbacks to consider. Not everyone is eligible for each of these lending products.
Collateral Lending Products
Title and pawn loans require collateral. The other two options do not. If somebody is still financing his or her vehicle, being able to borrow money with a title is probably not in the cards. Borrowing from a pawn shop requires the person to have something of value that the pawnbroker could sell if the customer defaults. Both of these borrowing opportunities also carry the risk of losing a valuable belonging. A title lending company can repossess a vehicle for nonpayment. A pawn shop can sell the pawned item if the minimum interest due is not paid back on time.
Payday and Installment Options
Local and online payday and installment lending products are all somewhat similar in regard to interest rates and requirements such as proof of income. The main difference is that installment loans can be paid back over several months, whereas payday loans must be paid in full by the next paycheck, which usually gives the borrower only two weeks. People may get into a cycle of refinancing by paying the interest due and extending the loan for another two weeks. Some pay off the amount in full and almost immediately take out another loan.
Installment products can be more affordable since the payments are spread out longer. The customer may be able to borrow more, too, because the entire amount won’t be due within two weeks. The borrower still must be completely aware that the interest rates are high, which can mean paying back a large amount in finance charges. The loan should be paid back as soon as possible, even if it means drastically cutting corners in the household budget for a while.